Europe has an edge over the US in the tightly-fought contest to sell India a next-generation engine for the homegrown Tejas light combat aircraft (LCA).
Informed sources have told Business Standard that when the bids were opened last week, European consortium Eurojet bid $666 million for 99 EJ200 engines, against US rival General Electric, which quoted $822 million.
Both engines had been earlier adjudged technically suitable to power the Tejas Mark-II. Therefore, according to the ministry of defence's procurement rules, the vendor offering the lower price is to be handed the contract.
But the champagne corks aren't popping yet at Eurojet. Both engine-makers have been asked for certain clarifications by Wednesday, and senior Eurojet executives are worried that Washington could pressure New Delhi to opt for the US engine in the interregnum.
At stake here is far more than a few hundred million dollars. Industry experts say India's choice of engine for the Tejas would significantly shape the choice of a medium multi-role combat aircraft (MMRCA), an $11-billion contract for which the Indian Air Force is evaluating six fighters.
Of these, the Eurofighter has twin EJ-200 engines, while GE F-414 engines power the US-built F/A-18 and Sweden's Gripen NG fighters.
Says Air Vice Marshall (Retd) Kapil Kak of the Centre for Air Power Studies, the IAF's official think tank, "It is as clear as daylight. Selecting the EJ200 for the Tejas would boost the Eurofighter's prospects in the MMRCA contest."
"Its engines, which form about 15-20 per cent of the cost of a modern fighter, would be already manufactured in India for the Tejas. For the same reason, rejecting the GE F-414 would diminish the chances of the two fighters that fly with that engine," he added.
In its tender for the Tejas engine, the defence ministry has specified that only ten engines could be built abroad. All subsequent engines must be built in India, with the vendor transferring technology for their manufacture.
If the EJ200 were built in India for the Tejas, Eurofighter would benefit from a fully amortised engine line and also be entitled to offset credits for the 'made-in-India' Eurofighter EJ200 engines.
This would lower the price of the Eurofighter - a huge advantage for an aircraft regarded as high performance, but expensive. Logistically, too, the IAF would prefer an MMRCA with engines that were already in its inventory.
Selection of the GE F-414 engine, on the other hand, would provide all these advantages to the vendors of the F/A-18 and the Gripen NG fighters. This is a key reason why Eurojet and GE have conducted their Tejas engine campaign so competitively.
Furthermore, the order for 99 engines for the Tejas Mark-II is just a foot in the door to the Indian market.
Given that each fighter goes through two to three engines during its operational lifetime, the four to five planned squadrons (84-105 fighters) of the Tejas Mark-II would actually need 200-300 new engines. The 126 MMRCAs could use several hundred more.
Business Standard had earlier reported on the European aerospace industry's plan to enhance its presence in India's military programmes through Eurofighter and the MMRCA contest.
The first move by EADS was to provide consultancy to accelerate flight-testing of the Tejas; now comes the second move: bidding aggressively to win the Tejas engine contract.
Defence ministry sources have expressed surprise that Eurojet bid 20 per cent cheaper than rival General Electric, which is widely regarded as a cost-effective manufacturer. In fact, conversations with EADS executives reveal that this is a well-considered business strategy.
Sources in the Aeronautical Development Agency confirm that both GE and Eurojet engines fully met the technical requirements to power the Tejas Mark-II. The EJ200 -which IAF favours - is the more modern, lighter and flexible engine with greater potential for growth. The GE F-414 is heavier, but provides a little more power.
Eurojet is a consortium between Avio (Italy), ITP (Spain), MTU Aero Engines (Germany) and Rolls-Royce (UK), which was set up to develop the EJ200 engine for the Eurofighter. It is headquartered in Hallbergmoos, Germany.